McGuinty sticks up for Chinese firm Huawei accused of spying

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Premier Dalton McGuinty has come to the defence of Huawei Canada, a unit of China’s biggest telecom equipment maker that is facing U.S. accusations of espionage.

“I don’t really understand the concerns that have been raised south of the border,” McGuinty told reporters Tuesday.

“Of course here in Ontario we rely on the federal government, which has responsibility for international security concerns,” he said, noting that Huawei is doing work with telecom service providers Bell Canada, Telus, SaskTel and Wind Mobile.

Bell in a statement said it has confidence in its network suppliers including Huawei, adding that the privately-held Chinese firm “partners with most of the world’s major wireless carriers.”

McGuinty said he has met with Huawei representatives in China to secure an expansion of investment in Ontario. “Those jobs are very important to us,” said the premier, who toured Huawei’s Canadian headquarters in Markham last Oct. 13.

Huawei employs about 400 people in Ontario — 280 at the Markham headquarters and about 120 at a research and development facility in the Ottawa suburb of Kanata.

The U.S. House Intelligence Committee’s report has implications for Canada because Huawei could also be in the running to help build the government’s new secure telecommunications system.

The committee revived long-standing criticism that Huawei Technologies Ltd. and ZTE Corp. are linked to Chinese intelligence, which could use their products for cyber-espionage — a charge both the companies and the Chinese government loudly denied Tuesday.

In 2010, the firm received a strategic jobs investment fund grant of $6.5 million from the provincial government in exchange for creating 164 new jobs and investing $67 million here.

“If at some point in time authorities within the federal government believe that they have real concerns then I expect that they will raise those with us,” McGuinty said.

A Department of Foreign Affairs spokesperson did not immediately respond to a request for comment.

But Queen’s University IT security expert David Skillicorn said Canada’s pragmatic approach to Chinese telecoms is putting the security of the nation’s communications infrastructure at risk because of potential Chinese state influence on the companies.

He said the federal government decided a few months ago not to ban Huawei Technologies, a decision he called a mistake.

“The Americans have it right. We shouldn’t be rolling out the red carpet for this company,” said Skillicorn, who noted that Australia has taken a similar approach to the U.S. in dealing with the China-based firms.

The U.S. House of Representatives’ Intelligence Committee issued a report Monday urging the U.S. not to conduct business with Huawei Technologies Co. Ltd. and ZTE Corp.

The bipartisan report — after an 11-month investigation — warned that China could use equipment made by the companies to spy on certain communications and threaten vital systems through computerized links.

The urging by the U.S. congressional committee arrives at a sensitive time for U.S.-China relations, ahead of the U.S. presidential and congressional elections and a transition of power to new leadership in China.

Both companies denied allegations in the report, which China rejected on Tuesday as “groundless” and “based on subjective suspicions.”

Huawei Canada in a statement said “we recognize, that as a Chinese-based telecommunications company, it is fair and reasonable to expect that we would be under some scrutiny from government. . . . For this reason, we have worked to conduct ourselves in a manner that positively reflects our contribution to Canada.”

Both Huawei and privately-held ZTE on Monday denied the U.S. accusations and said they operated according to market rules.

Monday’s U.S. report comes as the Harper government reviews the proposed Chinese takeover of Alberta oil company Nexen.

Laura Dawson, president of government trade consultancy Dawson Strategic and a senior fellow at the Macdonald-Laurier Institute in Ottawa, noted that the U.S. stance toward China has become a key issue in the presidential race. She said the congressional report “does smack of political convenience.”

Dawson added that Canada has a more robust foreign investment regulatory and review mechanism than the U.S., where there is a greater focus on political optics as a result.

She said companies like Huawei may well be “bad guys,” but argued that their overriding impetus to aggressively seek financial opportunities means they are working to gain trust in the global marketplace.

Investment from Chinese telecoms companies, however, requires verification of compliance with laws and regulations through measures such as audits and “no-fly zones,” areas of the economy where the firms could not participate, Dawson added.